Money Disappears from the Russian Market

A curious situation is forming on the Russian money market

Everything is cheapening - the currency, blue chips stocks, state and corporate bonds, but no one knows, where the released funds are coming to. The premature optimism about the results of the American economy can be easily replaced with disappointment. Market members' certain hopes have been justified, but not in the way that they actually wanted. No radical changes have been registered on the world market recently, but stock indexes are going down. The Dow index in the USA has been negative for three days.

Experts do not say that it is a considerable reduction - they prefer to use the word "stability" for it. However, the word does not change the essence of the whole matter: the Dow lost 0.5 percent overnight and NASDAQ dropped by 2.8 percent. Analysts say, the situation has been caused with weak reports from Nokia and IBM.

The European market dropped by 0.5-1.5 percent on Thursday, but the situation improved the next day: FTSE100 (Britain) gained 0.45 percent, DAX (Germany) gained 0.34 percent, CAC (France) rose by 0.04 percent. Asian markets finished the week peacefully, the Japanese NIKKEI increased by 0.3 percent on Friday.

The corporate data that were made public after the market was closed in the USA gave a reason to believe that the reduction would stop in the States too. Macroeconomic indexes were basically favorable: the growth of the business activity index in Philadelphia and an inconsiderable improvement of the labor market index. Analysts are carefully observing the situation on the American labor market, because the unemployment level in the USA has reached its maximum in nine years - 6.4 percent (the European level of unemployment makes up ten percent). However, the official information from the USA, which said that the number of applications for the unemployment allowance dropped from 441,000 to 412,000 over a week, did not make any impression. The statement from the US Commerce Department, which said that the home-building increased in June by 3.7 percent in comparison with May (by 5.5 percent during the year), was left unnoticed. Financial analysts preferred to focus on their disappointment.

The question of struggle between the dollar and the euro is still open. The two leading economies of the USA and the EU are experiencing similar problems - the reduction of the industrial output, the budgetary deficit, the deficit of the balance of trade, the growth of unemployment, money markets instability and so on. The European currency now costs $1.122 per one euro.

The same processes have exerted the direct influence on the situation on the Russian money market too. Market members could not help but use the favorable situation to intensify speculative operations with the dollar, although the attempts resulted in a certain strengthening of the American currency. Oil prices are still on a high level, which keeps the Russian ruble stable too.

Yesterday, the dollar rate dropped by six kopecks and made up 30.43 rubles per dollar. In Russia, the dollar has been sliding for three days in a row - it has already become ten kopecks as cheap. However, according to the results of the past week, the dollar rate gained five kopecks against the ruble.

A couple of days ago, experts explained the situation with the Russian Central Bank's interference. However, they are now drawn to believe that the market has been balanced out with the help of the demand and supplies balance. The dollar-ruble rate is still looking for a balance, experts think - they do not see any prerequisites either for a considerable growth or reduction of the dollar. Analysts believe, the dollar will most likely keep the current level. As far as the euro rate is concerned, it has not changed much recently: 34.18-34.23 rubles per one euro.

On the whole, experts are certain that the Russian money market is experiencing a rather curious situation. Everything is cheapening, and no one knows, where the released market funds are coming to. The demand balance of commerce banks on  loro accounts at the Russian Central Bank was rather high during the week, although the index dropped by 25.5 billion rubles to 117.6 billion rubles. It seems that the money is moving from one place to another, although one can only see the top of the iceberg: the money is flowing out from traditional financial tools. Since banks are investing money presumably in currency, the dollar rate growth is to start again after the latest correction, experts say. Otherwise, the market might continue price fluctuations within the level of 30.30-30.50 rubles per one American dollar.

However, if all released funds are invested in currency and flow out of the country, the demand on the dollar might considerably exceed the above-mentioned level. Such a possibility will definitely require a strict interference of the Russian Central Bank. For the time being, the Central Bank set the new ruble rate against foreign currencies. The dollar will cost 30.4316 rubles on July 19th - 5.75 kopecks as less vs. the previous level. The euro will cost 34.2051 rubles per euro - the euro rate slid by 2.5 kopecks.